PART 6CALCULATION OF CAPITAL AND INCOME

CHAPTER 2EARNED INCOME

Employed earnings55

1

This regulation applies for the purposes of calculating earned income from employment under a contract of service or in an office, including elective office (“employed earnings”).

2

Employed earnings comprise any amounts that are general earnings, as defined in section 7(3) of ITEPA, but excluding—

a

amounts that are treated as earnings under Chapters 2 to 11 of Part 3 of ITEPA (the benefits code); and

b

amounts that are exempt from income tax under Part 4 of ITEPA.

3

In the calculation of employed earnings the following are to be disregarded—

a

expenses that are allowed to be deducted under Chapter 2 of Part 5 of ITEPA; and

b

expenses arising from participation as a service user (see regulation 53(2)).

4

The following benefits are to be treated as employed earnings—

a

statutory sick pay;

b

statutory maternity pay;

c

ordinary statutory paternity pay;

d

additional statutory paternity pay; and

e

statutory adoption pay.

5

In calculating the amount of a person’s employed earnings in respect of an assessment period, there are to be deducted from the amount of general earnings or benefits specified in paragraphs (2) to (4)—

a

any relievable pension contributions made by the person in that period;

b

any amounts paid by the person in that period in respect of the employment by way of income tax or primary Class 1 contributions under section 6(1) of the Contributions and Benefits Act; and

c

any sums withheld as donations to an approved scheme under Part 12 of ITEPA (payroll giving) by a person required to make deductions or repayments of income tax under the PAYE Regulations.